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Takata hires Lazard, seeks cash infusion after air bag deaths

Thursday, May 26, 2016 - 06:46

Takata Corp hired investment bank Lazard to lead a financial restructuring in an effort to resolve costs stemming from its recall of tens of millions of faulty air bags linked to at least 13 deaths and more than 100 injuries worldwide, sources said Wednesday.

PHOTO: REUTERS

[TOKYO] Takata Corp hired investment bank Lazard to lead a financial restructuring in an effort to resolve costs stemming from its recall of tens of millions of faulty air bags linked to at least 13 deaths and more than 100 injuries worldwide, sources said Wednesday.

Takata's board of directors in February named an outside steering committee to develop a comprehensive restructuring plan to address the financial and operational issues related to its recall of the defective inflators.

Takata's committee retained Lazard to "expeditiously seeking new investment for Takata,"according to a document seen by Reuters.

Takata, which posted a net loss of 13.1 billion yen (S$164 million) for the year ended in March, potentially could face billions of dollars in costs related to the recall.

Earlier this month, the US Transportation Department and Takata confirmed that 17 automakers will recall another 35 million to 40 million US air bag inflators by 2019 - on top of 28.8 million recalled previously.

Takata's steering committee has retained Lazard "as part of a broader undertaking to address Takata's financial and operational issues and to resolve its inflator issues on a consensual basis in partnership with its automotive customers,"according to the document seen by Reuters.

The company is actively working to avoid a bankruptcy restructuring, a person close to the company said.

Earlier this month, Takata booked its third annual loss in four years because of an increase in recall costs.

Reuters reported that if Takata was found to be solely responsible for the problem, it could face a bill of more than US$9 billion in recall costs, based on a rough calculation that each replacement kit costs around US$100.

It also faces numerous US lawsuits, including a suit filed earlier this month by the state of Hawaii. The company also faces an ongoing criminal investigation Justice Department investigation.

The committee is working to reform Takata's governance structure, and to ensure the equitable treatment of claims for all automotive customers, the document said.

In April, Reuters reported Takata had begun looking for a financial backer and planned to draw up a list of candidates by August, citing two people familiar with the matter.

In November, Takata agreed to pay a US$70 million fine for safety violations and could face deferred penalties of up to US$130 million under a settlement with the US National Highway Traffic Safety Administration (NHTSA).

NHTSA named John Buretta, a former official in the Justice Department's criminal division, in December to serve as an independent monitor overseeing the Takata recalls.